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Hotmail switches antivirus providers

Microsoft chooses antivirus software maker Trend Micro to protect Microsoft's widely used Hotmail Internet e-mail service, replacing McAfee.
/ Source: Reuters

Trend Micro Inc.'s stock bounced about 9 percent to near a four-year high Monday after Microsoft Corp. chose the antivirus software maker to protect Microsoft's widely used Hotmail Internet e-mail service.

Microsoft's decision effectively drops most of the antivirus services it had been getting from McAfee Inc., whose shares tumbled Monday by about 8 percent after news of the deal triggered investor concern about how the loss of the Hotmail business would hit its revenue and profit outlook.

Terms of Microsoft's deal with Trend Micro were not disclosed.

Bill Kerrigan, senior vice president of McAfee's consumer division, said the revenue impact from Microsoft's decision would be minimal.

"The impact of today's announcement on revenue will be negligible," said Kerrigan, adding the business McAfee lost was "limited to a very small piece of our relationship with Microsoft."

(MSNBC is a Microsoft - NBC joint venture.)

A Microsoft spokeswoman said Trend Micro will do all the e-mail scanning for most of the 187 million users of the company's Hotmail service, the biggest Internet e-mail service. But she said McAfee will continue to run antivirus and firewall services for premium Microsoft e-mail users.

Microsoft has fewer than 9 million premium e-mail customers, who buy services such as parental controls and extra storage.

Hotmail users will receive automatic protection whenever they send and receive e-mail attachments using Trend Micro'sscanning and detection services, Tokyo-based Trend Micro saidin a statement.

Merrill Lynch analyst Edward Maguire, in a research note, estimated that "any financial impact" on McAfee would be lessthan $500,000 per year.

"Although the deal is a negative blow to sentiment, it does not affect our confidence in 2005 estimates," Maguire said.

Wedbush Morgan Securities analyst Kevin Trosian estimated that the Microsoft business McAfee lost contributed $10 million to $20 million in revenue, but said the news did not affect his outlook on McAfee, which he rates as a "buy."